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5.
Immigration Act
Introduction
5.1 The Immigration Act (IA) received Royal Assent in May 2014. It is due to come into force later
this year. Section 40 of the IA will prohibit banks and building societies from opening current
accounts for persons who do not have leave to remain in the UK, referred to in the IA as
‘disqualified persons’.
5.2 Banks and building societies will be required to carry out an immigration ‘status check’ with
the specified anti-fraud or data-matching authority before opening a current account for a
consumer, a micro-enterprise or a charity with an annual income under one million pounds. The
Home Office announced in February this year that it intended to name CIFAS as the specified
authority.
5.3 The prohibition above will include the opening of joint current accounts for any disqualified
person, opening a current account where the disqualified person is a signatory or is identified
as a beneficiary of that current account or is added as a current account holder or as a signatory
or identified beneficiary in relation to a current account.
5.4 This chapter is split into three sections. Paragraph 5.6 briefly describes the legal framework,
namely, the IA and the proposals contained in draft regulations. Paragraph 5.12 describes our
proposals. Lastly, paragraph 5.16 explains our approach to monitoring and enforcement. We
seek your views on our proposals.
5.5 This chapter will be of interest to all banks and building societies that offer current accounts
in the UK, referred to hereafter as ‘firms’. This includes UK branches of EEA banks and
non-EEA banks. For this purpose ‘bank’ means any person who has a Part 4A permission to
accept deposits or an EEA firm that has permission to accept deposits as a result of exercising
a passport. However, there are exemptions for:
• a person who has permission to accept deposits only for the purposes of, or in the course
of, an activity other than accepting deposits
• a person who is an exempt person (as a result of section 38 of Financial Services and
Markets Act 2000 (FSMA))
• a credit union and
• a friendly society.
20 June 2014 Financial Conduct Authority
CP14/8 Quarterly Consultation No. 5
Legislative proposals
5.6 Regulations proposed under the IA have yet to be made. We are consulting on the basis that
these draft regulations will be available to firms during this consultation period. Should this
change we will extend the consultation as necessary.
5.7 Once made, the regulations would enable the FCA to make arrangements to monitor and
enforce compliance with the new prohibition imposed on banks and building societies by
section 40 of the IA.
5.8 This consultation does not seek to expand on the IA, and we do not intend to provide guidance or
additional rules that expand on the legislation. We do understand that firms will have questions
on the application of the legislation, so where possible we will signpost firms to sources of
information and we will work with industry and trade associations to help compliance with
their obligations under the IA.
5.9 This consultation describes the role that the FCA will play and the information that firms will
need to provide to us.
5.10 The regulations, once made, will require firms to provide information to the FCA and if a firm
is unable to comply with any relevant requirements applicable to it, it must inform us about its
inability to comply as soon as reasonably practicable.
5.11 Firms should also keep records that relate to their compliance with the requirements for at least
five years.
Summary of our proposals
5.12 We plan to require all firms (banks and building societies) offering current accounts to confirm
to us each year that they have complied with the IA by using a power of direction in the
regulations.
5.13 This confirmation will be included as a question in the new annual report and accounts form
(FIN-A) for firms as proposed in Chapter 4 of this CP.
5.14 We have taken the opportunity to combine this new proposed reporting requirement for firms
with their annual accounts submission because it will be more efficient for firms and for us.
Firms that are not required to provide their annual report and accounts using form FIN-A, for
example, UK branches of EEA banks, must still report their compliance with the IA using Form
FIN-A and must do so within four months of their accounting reference date.
5.15 This information will be collected from firms in the new form FIN-A from 1 January 2015 when
changes to the reporting system GABRIEL are live. To ensure that this reporting requirement
covers all firms and all periods:
• the first attestation for all firms should confirm compliance with the provisions of the IA
from the date that the IA comes into force
• firms who have an annual report and accounts reporting requirement before 31 December
2014 and after the IA comes into force should also confirm in writing to FCA supervision
that they have complied with the provisions of the Act for the same period.
Financial Conduct Authority June 2014 21
Quarterly Consultation No. 5 CP14/8
Q5.1: Do you agree with our proposals to require firms to tell
us that they are complying with the IA?
Monitoring and enforcement
5.16 We will make arrangements to monitor and enforce the prohibition as part of our normal
regulatory functions. Firms will have to notify their normal supervisory contact as soon as
reasonably practicable if they are unable to comply with the requirements in the legislation.
Supervisors may ask firms to provide additional information in response to any notification or
as part of their general monitoring activities.
5.17 Firms will need to ensure that they have adequate systems in place to take a decision on
whether the data provided as part of their ‘status check’ is sufficient to identity a ‘disqualified
person’ prior to opening a current account for a consumer, a micro-enterprise or a charity.
5.18 The Government has not sought to define what a ‘current account’ is in the legislation, on
the basis that they are subject to constant changes in their functionality and such a definition
in legislation would need continual revision to keep up with market developments. Firms
will need to take their own decisions on which of their products they consider to be current
accounts for the purposes of the IA.
Our approach to taking enforcement action under the regulations
5.19 The draft regulations give the FCA investigation and sanctioning powers based on those in
FSMA. Therefore, we propose including new paragraphs in chapter 19 of the Enforcement
Guide (EG) explaining that our approach to using these powers should mirror our approach
to using the enforcement powers given to us by FSMA. This approach involves exercising our
enforcement powers in a manner that is transparent, proportionate, responsive to the issue,
and consistent with our publicly-stated policies.
Decision-making procedures
5.20 The draft regulations require the FCA to issue a statement of our procedure for giving warning
notices and decision notices under the regulations.
5.21 The Regulatory Decisions Committee (RDC) makes warning notice and decision notice decisions
on behalf of the FCA in respect of all existing disciplinary powers that the FCA has under
FSMA and other legislation. Therefore, to ensure we have a consistent approach, we propose
that decisions to issue warning and decision notices under the regulations should be made by
the RDC.
5.22 We propose to amend DEPP 2 Annex 1 to reflect this. We also propose to mention that this will
be our approach in chapter 19 of EG.
Q5.2: Do you agree with our proposed amendments to
DEPP and EG?
22 June 2014 Financial Conduct Authority
CP14/8 Quarterly Consultation No. 5
Cost benefit analysis
5.23 The draft regulations provide that in discharging its functions under the regulations the FCA
must have regard to the principle that a burden or restriction should be proportionate to the
benefits, considered in general terms, which are expected to result from the imposition of that
burden or restriction.
5.24 We expect that the incremental costs to firms in meeting the reporting requirements will be of
minimal significance and will be caught up in any costs associated with changes to systems and
procedures as a result of the IA.
5.25 For the time being, it is expected that any additional supervisory and enforcement costs will
be absorbed into our existing budget and therefore there will be no additional costs to firms
Q5.3: Do you agree with our analysis that the costs involved
will be of minimal significance?
Compatibility statement
5.26 These new responsibilities sit outside the FCA’s main responsibilities under FSMA. Therefore,
we have not prepared a compatibility statement.
5.27 The proposed changes are not expected to have a significantly different impact on mutual
societies.
Equality and diversity
5.28 The Government has considered issues of equality and diversity prior to the introduction of
the IA. We do not believe that our arrangements to monitor or enforce compliance with the
IA will have any negative impacts on protected groups as our proposals impose reporting
requirements on banks and building societies and not on any protected groups.
Immigration Act
Introduction
5.1 The Immigration Act (IA) received Royal Assent in May 2014. It is due to come into force later
this year. Section 40 of the IA will prohibit banks and building societies from opening current
accounts for persons who do not have leave to remain in the UK, referred to in the IA as
‘disqualified persons’.
5.2 Banks and building societies will be required to carry out an immigration ‘status check’ with
the specified anti-fraud or data-matching authority before opening a current account for a
consumer, a micro-enterprise or a charity with an annual income under one million pounds. The
Home Office announced in February this year that it intended to name CIFAS as the specified
authority.
5.3 The prohibition above will include the opening of joint current accounts for any disqualified
person, opening a current account where the disqualified person is a signatory or is identified
as a beneficiary of that current account or is added as a current account holder or as a signatory
or identified beneficiary in relation to a current account.
5.4 This chapter is split into three sections. Paragraph 5.6 briefly describes the legal framework,
namely, the IA and the proposals contained in draft regulations. Paragraph 5.12 describes our
proposals. Lastly, paragraph 5.16 explains our approach to monitoring and enforcement. We
seek your views on our proposals.
5.5 This chapter will be of interest to all banks and building societies that offer current accounts
in the UK, referred to hereafter as ‘firms’. This includes UK branches of EEA banks and
non-EEA banks. For this purpose ‘bank’ means any person who has a Part 4A permission to
accept deposits or an EEA firm that has permission to accept deposits as a result of exercising
a passport. However, there are exemptions for:
• a person who has permission to accept deposits only for the purposes of, or in the course
of, an activity other than accepting deposits
• a person who is an exempt person (as a result of section 38 of Financial Services and
Markets Act 2000 (FSMA))
• a credit union and
• a friendly society.
20 June 2014 Financial Conduct Authority
CP14/8 Quarterly Consultation No. 5
Legislative proposals
5.6 Regulations proposed under the IA have yet to be made. We are consulting on the basis that
these draft regulations will be available to firms during this consultation period. Should this
change we will extend the consultation as necessary.
5.7 Once made, the regulations would enable the FCA to make arrangements to monitor and
enforce compliance with the new prohibition imposed on banks and building societies by
section 40 of the IA.
5.8 This consultation does not seek to expand on the IA, and we do not intend to provide guidance or
additional rules that expand on the legislation. We do understand that firms will have questions
on the application of the legislation, so where possible we will signpost firms to sources of
information and we will work with industry and trade associations to help compliance with
their obligations under the IA.
5.9 This consultation describes the role that the FCA will play and the information that firms will
need to provide to us.
5.10 The regulations, once made, will require firms to provide information to the FCA and if a firm
is unable to comply with any relevant requirements applicable to it, it must inform us about its
inability to comply as soon as reasonably practicable.
5.11 Firms should also keep records that relate to their compliance with the requirements for at least
five years.
Summary of our proposals
5.12 We plan to require all firms (banks and building societies) offering current accounts to confirm
to us each year that they have complied with the IA by using a power of direction in the
regulations.
5.13 This confirmation will be included as a question in the new annual report and accounts form
(FIN-A) for firms as proposed in Chapter 4 of this CP.
5.14 We have taken the opportunity to combine this new proposed reporting requirement for firms
with their annual accounts submission because it will be more efficient for firms and for us.
Firms that are not required to provide their annual report and accounts using form FIN-A, for
example, UK branches of EEA banks, must still report their compliance with the IA using Form
FIN-A and must do so within four months of their accounting reference date.
5.15 This information will be collected from firms in the new form FIN-A from 1 January 2015 when
changes to the reporting system GABRIEL are live. To ensure that this reporting requirement
covers all firms and all periods:
• the first attestation for all firms should confirm compliance with the provisions of the IA
from the date that the IA comes into force
• firms who have an annual report and accounts reporting requirement before 31 December
2014 and after the IA comes into force should also confirm in writing to FCA supervision
that they have complied with the provisions of the Act for the same period.
Financial Conduct Authority June 2014 21
Quarterly Consultation No. 5 CP14/8
Q5.1: Do you agree with our proposals to require firms to tell
us that they are complying with the IA?
Monitoring and enforcement
5.16 We will make arrangements to monitor and enforce the prohibition as part of our normal
regulatory functions. Firms will have to notify their normal supervisory contact as soon as
reasonably practicable if they are unable to comply with the requirements in the legislation.
Supervisors may ask firms to provide additional information in response to any notification or
as part of their general monitoring activities.
5.17 Firms will need to ensure that they have adequate systems in place to take a decision on
whether the data provided as part of their ‘status check’ is sufficient to identity a ‘disqualified
person’ prior to opening a current account for a consumer, a micro-enterprise or a charity.
5.18 The Government has not sought to define what a ‘current account’ is in the legislation, on
the basis that they are subject to constant changes in their functionality and such a definition
in legislation would need continual revision to keep up with market developments. Firms
will need to take their own decisions on which of their products they consider to be current
accounts for the purposes of the IA.
Our approach to taking enforcement action under the regulations
5.19 The draft regulations give the FCA investigation and sanctioning powers based on those in
FSMA. Therefore, we propose including new paragraphs in chapter 19 of the Enforcement
Guide (EG) explaining that our approach to using these powers should mirror our approach
to using the enforcement powers given to us by FSMA. This approach involves exercising our
enforcement powers in a manner that is transparent, proportionate, responsive to the issue,
and consistent with our publicly-stated policies.
Decision-making procedures
5.20 The draft regulations require the FCA to issue a statement of our procedure for giving warning
notices and decision notices under the regulations.
5.21 The Regulatory Decisions Committee (RDC) makes warning notice and decision notice decisions
on behalf of the FCA in respect of all existing disciplinary powers that the FCA has under
FSMA and other legislation. Therefore, to ensure we have a consistent approach, we propose
that decisions to issue warning and decision notices under the regulations should be made by
the RDC.
5.22 We propose to amend DEPP 2 Annex 1 to reflect this. We also propose to mention that this will
be our approach in chapter 19 of EG.
Q5.2: Do you agree with our proposed amendments to
DEPP and EG?
22 June 2014 Financial Conduct Authority
CP14/8 Quarterly Consultation No. 5
Cost benefit analysis
5.23 The draft regulations provide that in discharging its functions under the regulations the FCA
must have regard to the principle that a burden or restriction should be proportionate to the
benefits, considered in general terms, which are expected to result from the imposition of that
burden or restriction.
5.24 We expect that the incremental costs to firms in meeting the reporting requirements will be of
minimal significance and will be caught up in any costs associated with changes to systems and
procedures as a result of the IA.
5.25 For the time being, it is expected that any additional supervisory and enforcement costs will
be absorbed into our existing budget and therefore there will be no additional costs to firms
Q5.3: Do you agree with our analysis that the costs involved
will be of minimal significance?
Compatibility statement
5.26 These new responsibilities sit outside the FCA’s main responsibilities under FSMA. Therefore,
we have not prepared a compatibility statement.
5.27 The proposed changes are not expected to have a significantly different impact on mutual
societies.
Equality and diversity
5.28 The Government has considered issues of equality and diversity prior to the introduction of
the IA. We do not believe that our arrangements to monitor or enforce compliance with the
IA will have any negative impacts on protected groups as our proposals impose reporting
requirements on banks and building societies and not on any protected groups.
